Re-emergence of Industrial Relations in India

Posted in Human Resources Articles, Total Reads: 1310
, Published on 09 October 2015

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Personnel management came to the centre stage in the growing era of industrialisation when the focus of managing the workforce to improve productivity was realised by the employers. No longer could industrial growth be achieved by exploitation and intimidation. This saw the birth of an area called “Personnel Management and Industrial Relations (PMIR)”. A number of laws came into force to protect worker rights and working conditions during this time. However, globalisation saw emergence Human Resource Management which evolved as a supplement to PMIR. It sought to move away from the administrative functions of Personnel Management to a more proactive and transformational role called Transformational HRM. What, however has been lost in this is an important subject called “Industrial Relations”. HRM has in a way cut its ties with IR and emerged as a separate subject. We look in this article at the various phases in the development of “Industrial Relations” as a subject and profession and see what is in store for India especially with the advent of the Modi government and “Make in India” initiative.

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The Consolidation Phase

The decade was led by the first two 5-year plans from 1951-56 and from 1956-61. Average annual industrial production grew at 7.7% and manufacturing output increased at 7.6%. Labour relations was still in its initial stages with the advent of the Industrial Disputed Act in 1947.

The state owned majority of the industries in the country and followed the idea of a national minimum. State intervened in the determination of wages by the way of wage boards by adjudication. An important reason for the increased number of strikes was unsatisfactory personnel management. In India disputes relating to personnel matters formed nearly 30 per cent of the total number of industrial disputes. This showed the dismal state of affairs regards to the IR managers in the country among other factors affecting inefficient personnel management. (Bhattacherjee, 2001)

The State intervention phase and Conflicts

1960 to 1979

This period was the era of union multiplicity. The number of registered unions in 1979 had increased to 10,021 up from 2002 in 1951. This increase in the number of unions can be attributed to the following reasons:

a. Industrial Production and Manufacturing Output growth declined to 3.6% and 3.1% respectively. There was also a decline in average annual growth rate in employment to 2.2% in 1967-69 and 1.8% in the period 1974-79. The unemployment rate also saw a 100% increase and doubled during this period

b. Inability of INTUC to effectively represent union aspirations at the larger level

c. New entrants in the labour market were from the years which came post-independence and they could not associate with the national party

d. Proliferation of lawyers and student activists in the newly formed unions, unlike political party people in the older ones

This period also saw the introduction of the 1976 amendment to the ID Act which required employers employing 300 or more workmen to get permission from the government before retrenching workmen. This single pro-union populist move stifled the employers in India and led to innumerable lockouts across the country. This was the period when IR gained its importance as tactfulness was required on part of the IR managers while handling workmen issues.

Evolution of productivity and efficiency as a primary focus

1980–1991

A deﬁning feature of this phase is the rise and proliferation of ‘independent’ unions operating and competing with the traditional party afﬁliated unions. It so happened that the so called ‘independent’ unions were able to extract from the employers higher wages and other benefits when compared to other affiliated unions. The disputed involving unaffiliated unions saw a tremendous increase during the 1970s. The ratio of registered unions that ‘submit returns’ to the total number of registered unions fell sharply from 60 per cent in 1962 to 13 per cent in 1982. (Bhattacherjee D. a., 1994)

There was another development during this period and that was an improvement in labour productivity and efficiency. While the growth in employment declined, this phase saw a growth of approximately 7.5% in terms of labour productivity (Ahluwalia, 1992).

Post globalisation phase

1991 saw a major reform in the Indian economic policy. This also saw a great need for flexibility and transparency. The government moved towards reform of labour legislations and the power of unions weakened a little. Industrial relations was replaced with a new term “Employee Relations”.

Some changes in the industrial relations can be captured by this table:

The need for flexibility saw the emergence of new sectors like IT, services. The GDP grew at an average of 6.3 %. The number of industrial disputes saw a decreasing trend and labour productivity increased. The employment in organised manufacturing sector grew at an average of 2.6 %.

But all was not well, it has to be noted that during this phase the global economy was also growing. However, this phase marked the emergence of subjects like employee motivation, retention, and engagement. This era also marked the emergence of terms like “Blue collared” and “White collared” employees. HRM being primarily an individualistic concept came into limelight and IR, a collective concept was lost in the background. This marked the beginning of phasing out of the subject called IR, and its integration with the broad umbrella of HRM. There was a shift of focus from the so called “Blue collared” employees to “White collared” employees. There was more focus on executive compensation, retention and this phase also saw trends like “promotee candidate” where a workmen was promoted to an executive cadre.

What liberalisation also brought was an excessive focus on profitability and productivity. Companies in India started to focus more on reducing cost and this led to concepts like “VRS”, “Golden handshake”. Economic restructuring also led increase in contract provision, job transfers to non – bargain able category, mergers and a suspension of industrial action. (Venkataratnam, 1996)

So at the micro level, unions seemed to be cooperating with the management, but the labour movement had been apprehensive. (Bhattacherjee D. a., Unions, Wages and Labour Markets in Indian Industry, 1994)

The Financial Crisis, 2008

When the real estate bubble burst in the US, it had far-fetched consequences across the globe. India was not impervious to the effects. An in-direct consequence had been an even more focus of the employers to cut costs. The first target was the labour. There had been mass terminations, especially in IT sector. Even the Manufacturing sector, saw a huge increase in the number of contract labour, VRS and other ways of reducing workforce.

This significant change, and cost cutting techniques by the companies has again brought back a subject which was lost in the economic growth. There has been a stark increase in industrial unrest since 2008. This led to a fall of productivity. Also even though the number of strikes have reduced the number of workers involved have more or less remained constant. This is a very serious situation as it points to “Mass strikes” and hence a possible explanation for the increasing violence in automobile sector.

What lies ahead?

As it has been said earlier, that IR is primarily a collectivistic phenomenon. When the market functions effectively, which happened during the phases 1991-2008, the labour have no incentive to collectivise. The market takes care of the labour. There is no need for state intervention. That is the premise of capitalism. However, when market breaks down, like in 2008 or in a case where no market exists, (in the years 1951-1991) the labour collectivises to protect their needs. There is growing unionism and consequently IR takes the front stage.

With the developments ever since the financial crisis, there have been indications about such a phenomena. There is increased industrial unrest among companies, and increased unionisation of the contract workforce (the supposedly exploited class). Even the so called “White Collared” employees have started forming unions like in TCS to protect their rights.

A point has reached where there is a dire need of government intervention. This is clearly seen by some initiatives taken by the new government and proposed changes in the labour laws. Will the changes work for the benefit of the Indian economy or not is yet to be seen. But what is apparent with the changes is the growing need for strong Industrial Relations in Indian industries. Cases, like Manesar show how ill-equipped today’s HR managers are to deal with such issues. Industrial relations needs to change its age old “reactive approach” and become more “proactive”. This can be achieved only if Industrial Relations as a subject becomes if not the prime focus, an equally important component of the Human Resource Curriculum across B-schools in India. It is a startling fact the only 20-30% students of the prestigious B schools where HRM is taught as a subject, want to take up a career in Industrial Relations. One of the prime reasons for this is the pay. However if India Inc. wants to realise true economic growth, it has to realise the growing importance of Industrial relations and so do the educational institutions. As it is rightly said, to build a great building, you need to have a strong foundation.

This article has been authored by Aakash Parihar and Srinivas Sandipudi from XLRI

References

Ahluwalia, I. J. (1992). Redeﬁning the Role of the State: India at the Crossroads. New Delhi: Centre for Policy Research.